Analyzing Your Startup or Small Business Using SWOT

Today we’re continuing the summer reboot and re-doing an old post of mine to teach you how to use SWOT analysis in your business strategy development.

Now, I know that SWOT has become the punchline of many a joke and lots of people like to dismiss it as fluffy consultant stuff, but it’s not included in basically every business management text ever and used so ubiquitously because it’s useless, so it’s definitely worth developing an understanding of how to use and implement it in your business. If you do it right, it will focus your strategy development efforts and lead to better decision-making.

So, let’s dig in here. SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. It’s a quick and dirty way to look at a business’ place in the market in which it operates by examining its internal and external positives and negatives. This analysis can really be done on the back of a napkin but, despite its simplicity, it can give an owner clarity so he or she can improve problem areas and make the most of what the business excels at.

The SWOT diagram is a two by two grid with positives and negatives across the top and internal and external along the side. If you draw this up you’ll see the ever-famous SWOT box showing that strengths are internal positives, weaknesses are internal negatives, opportunities are external positives, and threats are external negatives.

This box provides the structure for your brainstorming session and now all you have to do is honestly fill in each of the boxes with your own company’s strengths, weaknesses, opportunities, and threats.

Let’s take an example to illustrate how you do this. Let’s say I sell ice cream on the beach. A strength, or internal positive, may be that I have a patented cooler cart that can hold more ice cream than anyone else’s cooler cart so that I can spend a lot more time on the beach selling and a lot less time re-stocking. A weakness or internal negative, however, may be that I only have one ice cream supplier, which leaves me with less variety and less control over pricing. An opportunity, or external positive, could be that the city is opening up a larger stretch of beach and adding an extra couple of lifeguards so there will be more beach-goers, a.k.a. potential customers, around for me to sell to. A threat or external negative, however, is that the meteorologists are predicting a rainy summer, which would mean way fewer beach-goers/potential customers.

Now, if you were really doing your own SWOT analysis for your own company, you’d come up with many more strengths, weaknesses, opportunities, and threats – not just one of each – so you’d have a more complete picture of where your business stands and what you need to address. And addressing them is key here. Once you’ve completed your brainstorming and filled in the grid, you’ve got your foundation, but you really need to use this information to come up with strategies for exploiting your strengths and opportunities, improving your weaknesses, and dealing with threats.

So, for example, you know there will be more people on the beach on sunny days because it’s a larger beach and one of your strengths is the larger cooler….so you want to fill that cooler all the way up before you start out to fully take advantage of the fact that you’ll have to re-stock less often than the other guys. On the other hand, you need to come up with a back-up plan if it does turn out to be a rainy summer. Perhaps there is a covered boardwalk or indoor area where would-be beach-goers tend to congregate when it rains. Be sure to get whatever permits or permissions you might need to sell there so that you’re ready to go and can keep selling without missing any days of sales, even if the rain does clear the beach. You should also identify and form relationships with other suppliers to eliminate the one-supplier weakness.

Clearly, this is a simplified example but the SWOT analysis technique can be used with all types of businesses in all types of markets and it’s a great way to quickly get a snapshot of what to tackle in your next strategy session.

If you’re an aspiring entrepreneur, the best thing you can do for yourself is to just get started. Pick up my business planning ebook here to be guided through the whole business planning process for less than $5.More of a video person than a text person? Click here to try my ecourses instead.